Thanks to a rebounding stock market and innovation coming from American companies, the U.S. has regained the top spot as the most competitive economy in the world, according to an annual ranking by Swiss business school IMD.
The report ranks 60 economies around the world and found that the United States has made strong enough strides in its economic recovery to move up from No. 2 in 2012.
The next top economies are Switzerland (No. 2), Hong Kong (No. 3 , and No. 1 in 2012), Sweden (No. 4) and Singapore (No. 5). Countries are rated on their ability s to create and maintain an environment in which enterprises can compete effectively on a global scale.
"While the euro zone remains stalled, the robust comeback of the U.S. to the top of the competitiveness rankings and better news from Japan have revived the austerity debate," said Stéphane Garelli, director of the IMD World Competitiveness Center. "Structural reforms are unavoidable, but growth remains a prerequisite for competitiveness."
Garelli noted in the report that social unrest among Europeans over austerity measures has hurt some European countries in the annual rankings.
"The harshness of austerity measures too often antagonizes the population," Garelli said. "In the end, countries need to preserve social cohesion to deliver prosperity."
Although the U.S. unemployment rate remains elevated at 7.5 percent, the country has some long-term advantages such as technology, education and advanced infrastructure, the report said.
Among Asian economies, China and Japan are becoming more competitive. In Japan’s case, robust financial stimulus pursued by Prime Minister Shinzo Abe to combat deflation have propelled the country’s currency and stock market.
South of the border, Mexico’s economy has become more competitive. The country has seen an expanding middle class and relatively strong growth in its gross domestic product.
But Mexico’s rise in rankings "needs to be confirmed over time and by the continuous implementation of structural reforms," the report noted.
IMD, a top business school in Switzerland, has published the annual rankings since 1989.
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